Claims

A Glut of Medical Causation Claims

Pinpointing whether a particular injury was work-related challenges physicians and employers. Some schemers take advantage.
By: | February 20, 2017 • 6 min read

So called “cappers” or “runners,” who are middlemen in fraud schemes, are illegally recruiting recently unemployed workers to file murky medical-causation allegations, helping to drive a surge in Southern California workers’ compensation cases.

“We are getting slammed with really unscrupulous lawyer-developed cases,” said Robert G. Rassp, a Southern California claimant attorney and author of the law blog “The Rassp Report.”

“They add in their claim not just the back injury, but psychiatric claims, sleep disorder and sexual dysfunction. They throw the whole book at the employer. Risk managers are going berserk over it.”

The participants in such schemes take advantage of California’s workers’ comp causation standards allowing the filing of cumulative trauma injury claims after a worker has been terminated, Rassp said. California further allows compensation when the causation is less than 1 percent work-related.

Even without the involvement of cappers, California’s liberal causation standards create headaches for employers in terms of apportioning between industrial and non-industrial factors behind post-termination cumulative trauma claims.

“We have a huge problem with this,” said a Southern California risk manager who asked not to be identified.

California’s laws are just one issue currently fueling more nationwide discussions about medical causation standards and the challenge of determining whether workplace exposures are responsible for specific cumulative trauma claims.

Robert Rassp, claimant attorney

Claims-payer desire for more states to adopt stricter injury-causation standards along with the shifting nature of jobs and worker demographics are also stirring those discussions.

Claims with questionable medical-causation assertions have always presented a conundrum for payers: Failing to challenge cases when the injury cause is not work-related leads to paying unwarranted benefits and emboldens others to file similar spurious cases.

Wrongly challenging claimants, on the other hand, when their medical conditions legitimately arise from work, can needlessly drive litigation costs, with the severity of those expenses depending on state statutes.

In Pennsylvania, for example, claims payers lacking a reasonable basis for contesting an injured worker’s petition may be ordered to pay the claimant’s lawyer fees and litigation costs, said Michael D. Sherman, a defense attorney at Chartwell Law Offices LLP in Pittsburgh.

Determining causation is easier when an obvious workplace accident, with witnesses, causes an easily identified injury like a severed finger or broken bone.

But with a cumulative trauma injury or chronic problem occurring over time, such as an inflamed shoulder or lower-back pain, confirming unequivocally that it arose during the course of employment challenges employers, injured workers and even doctors.

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Doctor training focuses on treating injuries, not on uncovering their cause, said Nancy Greenwald, a Boise, Idaho-based physician who treats workers’ comp patients.

“It’s one of the hardest things we do as physicians to really pinpoint what caused that particular injury,” she said.

Throw in the possibility of pre-existing conditions or an injury aggravation occurring after the industrial harm and making the right judgment call regarding the payer’s responsibility is even trickier.

While such scenarios present a challenge in determining the scope of legitimate claims, the schemers utilizing cappers in Southern California willfully take advantage to perpetuate fraud.

Last year, for example, a San Diego grand jury indicted doctors, medical providers and attorneys allegedly participating in a scheme involving cappers and $450,000 in illegal kickbacks.

Prosecutors allege it generated millions of dollars of fraudulent workers’ comp claims.

Other cappers have been busy in Southern California’s Orange and Los Angeles counties, soliciting workers who recently lost their jobs due to plant closings or other factors, Rassp said.

Rassp is alarmed by the practice because it increases claims payer suspicions, driving them to challenge more cases even when causation is legitimately work-related, he said.

Workers validly harmed on the job pay the price.

“If the problem is employment-related, deal with that.”– Stuart Colburn, a defense attorney at Downs Stanford P.C in Austin, Texas

A “glut” of post-termination cumulative trauma claims filed in Southern California perplexes employers who may delay benefit payments and create unwarranted friction with legitimately injured workers when they attempt to protect themselves, agreed Edward E. Canavan, vice president of the workers’ comp practice and compliance at Sedgwick Claims Management Services.

“It’s unfortunate,” because injured workers have families to care for, Canavan added.

The workers’ comp industry needs to consider legislative and regulatory changes to curb Southern California abuses while continuing to pay legitimate claims, Canavan said.

Nationwide, increased discussions about causation standards come after a number of states raised the level of medical evidence required to prove a work-related injury, said Thomas A. Robinson, co-author of “Larson’s Workers’ Compensation Law.”

“There are at least a half dozen states that over the past decade and a half made it more difficult for the claimant to prove their case based on requiring more definite medical opinions,” Robinson said.

Debra Levy, SVP, York Risk Services Group

While implementation of those laws “has sort of snuck up on people,” claimant representatives are increasingly complaining about them while claims payers want legislatures in more states to adopt similar legislation.

Greg McKenna, senior vice president for external affairs at Gallagher Bassett, expects more states to consider reforms with strengthened causation standards.

But passage of such laws probably will depend on balancing them with increased benefit amounts, he said.

“I really think lawmakers and employers are wrestling with a new kind of workforce,” McKenna said.

In the past, when workers remained at a single job for years, employers could more easily accept workplace responsibility for cumulative trauma, McKenna said.

But with workers frequently changing jobs, and perhaps even working a second job in the “gig-economy,” employers are asking whether they should accept cumulative-trauma injuries that workers may have acquired during previous employment.

Similarly, an older U.S. workforce raises questions about whether injuries are work-related or stem from age-related continuous degenerative processes.

The aging workforce, general increase in co-morbid conditions and uncertainty over group health make it more important than ever for payers to confirm that alleged injuries actually resulted from workplace accidents, said Maureen McCarthy, senior vice president, workers’ compensation claims, at Liberty Mutual.

Meanwhile, a U.S. Department of Labor report released in 2016 reviewed the impact of state laws with stricter causation standards that increased the burden of proof required for claimants to prove a workers’ comp claim, Robinson noted.

The report said that “issues of causation of injury or illness have always presented challenges.”

It added that “there is substantial cause for growing alarm,” because of increasingly complex challenges workers face with new causation standards requiring work to be the major contributing cause of disabilities.

Observers fret that the DOL’s report will drive federal intervention in state workers’ comp programs.

That still leaves the common challenge of filtering out other injury causes from workplace causation. The number of cases presenting those challenges can shift.

For full report: www.cwci.org/store.html

The Texas Department of Insurance, for example, has seen an increase in injured workers challenging the findings of designated doctors. They are requesting a “causation analysis” to determine issues such as maximum medical improvement, impairment rating, and extent of injury, a TDI spokesman said.

The department has not determined why more causation challenges are occurring.

But defense attorney Stuart Colburn at Downs Stanford P.C. in Austin said claimants have grown smarter at meeting requirements for challenging doctor findings that determine issues such as the extent of injury and return-to-work ability.

Mitigating claims with questionable causation issues calls for employers to identify the problem’s origin, Colburn said.

Employers experiencing multiple, unwitnessed, soft-tissue injuries should take a “big-picture approach” to learn, for example, if issues such as problematic employer/employee relations or the frequent assigning of unpleasant tasks is driving claim filings, he advised.

“If the problem is employment-related, deal with that,” Colburn said.

Return-to-work programs can help reduce unwarranted claims when workers realize they will be assigned other tasks rather than receiving time off, Colburn said.

Do not allow claims examiners to become jaded and assume a battle is lost when a jurisdiction’s laws, such as California’s, frequently work against favorable outcomes, said Debra Levy, senior vice president of product management and national workers’ comp practice leader at York Risk Services Group.

“Adjusters shouldn’t say, ‘That’s just the way the state is,’ without thoroughly investigating a claim,” she said. &

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

More from Risk & Insurance

More from Risk & Insurance

Cyber Liability

Fresh Worries for Boards of Directors

New cyber security regulations increase exposure for directors and officers at financial institutions.
By: | June 1, 2017 • 6 min read

Boards of directors could face a fresh wave of directors and officers (D&O) claims following the introduction of tough new cybersecurity rules for financial institutions by The New York State Department of Financial Services (DFS).

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Prompted by recent high profile cyber attacks on JPMorgan Chase, Sony, Target, and others, the state regulations are the first of their kind and went into effect on March 1.

The new rules require banks, insurers and other financial institutions to establish an enterprise-wide cybersecurity program and adopt a written policy that must be reviewed by the board and approved by a senior officer annually.

The regulation also requires the more than 3,000 financial services firms operating in the state to appoint a chief information security officer to oversee the program, to report possible breaches within 72 hours, and to ensure that third-party vendors meet the new standards.

Companies will have until September 1 to comply with most of the new requirements, and beginning February 15, 2018, they will have to submit an annual certification of compliance.

The responsibility for cybersecurity will now fall squarely on the board and senior management actively overseeing the entity’s overall program. Some experts fear that the D&O insurance market is far from prepared to absorb this risk.

“The new rules could raise compliance risks for financial institutions and, in turn, premiums and loss potential for D&O insurance underwriters,” warned Fitch Ratings in a statement. “If management and directors of financial institutions that experience future cyber incidents are subsequently found to be noncompliant with the New York regulations, then they will be more exposed to litigation that would be covered under professional liability policies.”

D&O Challenge

Judy Selby, managing director in BDO Consulting’s technology advisory services practice, said that while many directors and officers rely on a CISO to deal with cybersecurity, under the new rules the buck stops with the board.

“The common refrain I hear from directors and officers is ‘we have a great IT guy or CIO,’ and while it’s important to have them in place, as the board, they are ultimately responsible for cybersecurity oversight,” she said.

William Kelly, senior vice president, underwriting, Argo Pro

William Kelly, senior vice president, underwriting at Argo Pro, said that unknown cyber threats, untested policy language and developing case laws would all make it more difficult for the D&O market to respond accurately to any such new claims.

“Insurers will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure,” he said.

Going forward, said Larry Hamilton, partner at Mayer Brown, D&O underwriters also need to scrutinize a company’s compliance with the regulations.

“To the extent that this risk was not adequately taken into account in the first place in the underwriting of in-force D&O policies, there could be unanticipated additional exposure for the D&O insurers,” he said.

Michelle Lopilato, Hub International’s director of cyber and technology solutions, added that some carriers may offer more coverage, while others may pull back.

“How the markets react will evolve as we see how involved the department becomes in investigating and fining financial institutions for noncompliance and its result on the balance sheet and dividends,” she said.

Christopher Keegan, senior managing director at Beecher Carlson, said that by setting a benchmark, the new rules would make it easier for claimants to make a case that the company had been negligent.

“If stock prices drop, then this makes it easier for class action lawyers to make their cases in D&O situations,” he said. “As a result, D&O carriers may see an uptick in cases against their insureds and an easier path for plaintiffs to show that the company did not meet its duty of care.”

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One area that regulators and plaintiffs might seize upon is the certification compliance requirement, according to Rob Yellen, executive vice president, D&O and fiduciary liability product leader, FINEX at Willis Towers Watson.

“A mere inaccuracy in a certification could result in criminal enforcement, in which case it would then become a boardroom issue,” he said.

A big grey area, however, said Shiraz Saeed, national practice leader for cyber risk at Starr Companies, is determining if a violation is a cyber or management liability issue in the first place.

“The complication arises when a company only has D&O coverage, but it doesn’t have a cyber policy and then they have to try and push all the claims down the D&O route, irrespective of their nature,” he said.

“Insurers, on their part, will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure.” — William Kelly, senior vice president, underwriting, Argo Pro

Jim McCue, managing director at Aon’s financial services group, said many small and mid-size businesses may struggle to comply with the new rules in time.

“It’s going to be a steep learning curve and a lot of work in terms of preparedness and the implementation of a highly detailed cyber security program, risk assessment and response plan, all by September 2017,” he said.

The new regulation also has the potential to impact third parties including accounting, law, IT and even maintenance and repair firms who have access to a company’s information systems and personal data, said Keegan.

“That can include everyone from IT vendors to the people who maintain the building’s air conditioning,” he said.

New Models

Others have followed New York’s lead, with similar regulations being considered across federal, state and non-governmental regulators.

The National Association of Insurance Commissioners’ Cyber-security Taskforce has proposed an insurance data security model law that establishes exclusive standards for data security and investigation, and notification of a breach of data security for insurance providers.

Once enacted, each state would be free to adopt the new law, however, “our main concern is if regulators in different states start to adopt different standards from each other,” said Alex Hageli, director, personal lines policy at the Property Casualty Insurers Association of America.

“It would only serve to make compliance harder, increase the cost of burden on companies, and at the end of the day it doesn’t really help anybody.”

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Richard Morris, partner at law firm Herrick, Feinstein LLP, said companies need to review their current cybersecurity program with their chief technology officer or IT provider.

“Companies should assess whether their current technology budget is adequate and consider what investments will be required in 2017 to keep up with regulatory and market expectations,” he said. “They should also review and assess the adequacy of insurance policies with respect to coverages, deductibles and other limitations.”

Adam Hamm, former NAIC chair and MD of Protiviti’s risk and compliance practice, added: “With New York’s new cyber regulation, this is a sea change from where we were a couple of years ago and it’s soon going to become the new norm for regulating cyber security.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]